DIATREME RESOURCES LIMITED

DIATREME RESOURCES LIMITED

ABN: 33 061 267 061

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Postal Address: P.O Box 10288 Brisbane Adelaide Street QLD 4000 Registered Office: Level 2 87 Wickham Terrace Spring Hill QLD 4000 PH: +61 (0)7 3832 5666 FX: +61 (0)7 3832 5300 www.diatreme.com.au [email protected]

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ASX : DRX

Company Announcement Office Australian Securities Exchange Level 4, 20 Bridge Street Sydney NSW 2000

12 February 2014

RIGHTS ISSUE – LODGEMENT OF PROSPECTUS

Please find attached a Prospectus for the one for four renounceable rights issue by Diatreme Resources Limited (ASX:DRX), lodged with ASIC today.

It is planned that the Prospectus, together with an Entitlement and Acceptance Form will be sent to Eligible Shareholders on 27 February 2014.

Yours faithfully

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Anthony J Fawdon Executive Chairman/CEO

Company contact details: Tel : +61 7 3832 5666 Fax : +61 7 3832 5300 Email : [email protected]

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ABN 33 061 267 061

ENTITLEMENT OFFER PROSPECTUS

For a renounceable Entitlement Offer of one New Share and one free attaching New Option for every four shares held by Eligible Shareholders registered at 7:00 pm (Sydney time) on the Record Date (21 February 2014) at an issue price of 2 cents ($0.02) per New Share and New Option, to raise approximately $3.0 million.

The free attaching Options are exercisable at 2 cents ($0.02) each on or before 11 March 2016.

Shareholders eligible to participate in the Entitlement Offer, and non-shareholders, may apply for New Shares and New Options from the Shortfall (if any), and the Shortfall may also be placed under this Prospectus (Shortfall offer).

The Entitlement Offer closes at 5:00pm (Brisbane time) on 14 March 2014.

Lead Manager Patersons Securities Limited ABN 69 008 896 311 (AFS Licence 239 052)

Important notice

This is an important document and should be read in its entirety. If you do not understand its contents, you should consult your stockbroker, lawyer, accountant or other professional adviser before making an investment decision. You should have regard to all publicly available information concerning the Company.

The securities offered under this Prospectus should be considered as speculative.

CORPORATE DIRECTORY ....................................................................................................................3 IMPORTANT INFORMATION..................................................................................................................4 KEY TERMS OF THE OFFER.................................................................................................................6 TIMETABLE OF THE OFFER .................................................................................................................6 RISKS ......................................................................................................................................................7 CHAIRMAN’S LETTER ...........................................................................................................................8 DETAILS OF THE ENTITLEMENT OFFER ............................................................................................9 ACTIONS REQUIRED BY ELIGIBLE SHAREHOLDERS ....................................................................12 PURPOSE AND EFFECT OF THE ENTITLEMENT OFFER ................................................................15 EXPLORATION PROJECTS.................................................................................................................18 RIGHTS AND LIABILITIES ATTACHING TO THE NEW SHARES AND THE NEW OPTIONS ..........22 RISK FACTORS ....................................................................................................................................24 ADDITIONAL INFORMATION...............................................................................................................27 GLOSSARY ...........................................................................................................................................33

CORPORATE DIRECTORY

Directors

Anthony John Fawdon Executive Chairman David Hugh Hall Executive Director George Henry White Non-Exec Director Andrew Tsang Non-Exec Director Cheng (William) Wang Non-Exec Director Neil John McIntyre Non-Exec Director Yufeng (Daniel) Zhuang Non-Exec Director

Lead Manager to the Entitlement Offer

Patersons Securities Limited ABN 69 008 896 311 (AFS Licence 239 052) Level 15, 333 Collins Street Melbourne. VIC 3000

Telephone: (03) 9242 4000 Website: www.psl.com.au Email: [email protected]

Share Registry*

Company Secretary (Joint)

Mr Tuan Do Ms Leni Stanley

Registered Office

Level 2 87 Wickham Terrace Spring Hill QLD 4000

Telephone: (07) 3832 5666 Facsimile: (07) 3832 5300

Email: [email protected] Website: www.diatreme.com.au

Link Market Services Limited Level 15, 324 Queen St Brisbane QLD 4000

Telephone: 1300 544 474

Forms should not be sent to this address. The addresses for returning forms are set out on page 14, and in the relevant forms.

Solicitors

Quinert Rodda & Associates Pty Ltd Suite 1, Level 6, 50 Queen Street Melbourne VIC 3000

Auditor*

BDO Audit Pty Ltd Level 10, 12 Creek Street Brisbane QLD 4000

* This party has been included for information purposes only. Other than by consenting to the inclusion of its name in the Prospectus it has not been involved in the preparation of this Prospectus

IMPORTANT INFORMATION

Investors should read this document in its entirety and, if in doubt, should consult their professional advisers before deciding whether to apply for New Shares and New Options offered under this Prospectus.

This Prospectus is dated 12 February 2014 and a copy of this Prospectus was lodged with ASIC on that date. Neither ASIC nor ASX takes any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates.

This Prospectus contains and applies to the offer of New Shares and New Options under the Entitlement Offer (including the offer enabling non-shareholders to apply for New Shares and New Options from the Shortfall before the Closing Date), and the offer (if any) of New Shares and New Options from the Shortfall during the 3 months after the closing date (Shortfall offers).

The expiry date of this Prospectus is the date that is 13 months after the date of this Prospectus ( Expiry Date ). No New Shares or New Options will be allotted or issued on the basis of this Prospectus after the Expiry Date.

You should read this document carefully before you make a decision to apply for New Shares. An investment in the Company has risks, which you should consider before making a decision to invest. The New Shares offered under this Prospectus should be considered speculative.

This Prospectus is for an offer of continuously quoted securities and options to acquire continuously quoted securities, and has been prepared in accordance with section 713 of the Corporations Act. It does not contain the same level of disclosure as an initial public offering prospectus. In preparing this Prospectus regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and certain information about the Company may reasonably be expected to be known to investors and professional advisers whom potential investors may consult.

Electronic Prospectus

A copy of this Prospectus may be viewed online at the website of the Company at www.diatreme.com.au. No offer is made under the electronic form of this prospectus. Eligible Shareholders will be mailed a paper copy of this Prospectus with a personalised Entitlement and Acceptance Form.

The Corporations Act prohibits any person passing onto another person the Entitlement and Acceptance Form or other application form unless it is attached to the hard copy of the Prospectus or it accompanies the complete and unaltered version of the Prospectus.

Not investment advice

The information in the Prospectus has been prepared without taking into account your investment objectives, financial circumstances, taxation circumstances or particular needs. Before deciding whether to apply for New Shares and New Options you should consider whether they are a suitable investment for you in light of your own investment objectives, taxation circumstances and financial circumstances and having regard to the merits or risks involved. If, after reading this Prospectus, you have any questions about the Offer, you should contact your stockbroker, lawyer, accountant or other professional advisor, before making an investment decision.

Disclaimer

No person is authorised to give any information or make any representation in connection with the Entitlement Offer that is not contained in this Prospectus. Any information or representation not contained in this Prospectus may not be relied on and has not been authorised by the Company or the Directors. Neither the Company nor any other person warrants the future performance of the Company or any return on any investment made under this Prospectus.

Forward-looking statements

This Prospectus contains forward-looking statements that, despite being based on the Company's current expectations about future events, are subject to known and unknown risks, many of which are outside the control of the Company and the Directors. These known and unknown risks could cause actual results, performance or achievements to differ materially from future results, performance or achievements expressed or implied by forward-looking statements in this Prospectus. These risks include the risks outlined on pages 24 to 26. Forward-

looking statements include those containing such words as "anticipate", "estimate", "opportunity", "plan", "intend", "aim", "seek", "believe", "should", "will", "may" or similar expressions.

No overseas offering

This Prospectus is being sent to all Eligible Shareholders. This Prospectus does not constitute an offer in any jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer, and no action has been taken to register shares of the Company or otherwise permit a public offering of the shares in any jurisdiction outside of Australia and New Zealand. Return of the Entitlement and Acceptance Form or payment by BPAY[®] will be taken by the Company to constitute a representation by you that there has been no breach of any such laws. The distribution of this document or any application form outside Australia and New Zealand may be restricted by law. In particular, this document or any copy of it must not be taken into or distributed or released to any US person or to any person acting for the account or benefit of a US person (within the meaning of the U.S. Securities Act of 1933). Persons who come into possession of this document should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

Taxation

There will be tax implications associated with participating in the Entitlement Offer and receiving New Shares and New Options. The Company considers that it is not appropriate to give advice regarding the tax consequences of subscribing for New Shares and New Options under this document or the subsequent disposal of any such New Shares or New Options. You should consult your professional tax adviser in connection with the Entitlement Offer.

Privacy

The Company collects information about each applicant provided on an Entitlement and Acceptance Form or other application form for the purposes of processing the application and, if the application is successful, to administer the applicant’s shareholding in the Company.

By submitting an Entitlement and Acceptance Form or other application form, you will be providing personal information to the Company (directly or through the share registry). The Company collects, holds and will use that information to assess your application. The Company may disclose your personal information for purposes related to your shareholding in the Company, including to its share registry, agents, contractors and third party service providers, and to ASX and regulatory bodies. To make a request for access to your personal information held by (or on behalf of) the Company, please contact the Company through its share registry.

Governing law

The Prospectus and the contracts that arise on acceptance by the Company of applications are governed by the law of Queensland and each applicant submits to the exclusive jurisdiction of the courts of Queensland.

Glossary

A glossary of terms used in this Prospectus is included at the back of this Prospectus (page 33). In this Prospectus, references to ‘$’ or cents are to Australian currency, unless otherwise stated.

KEY TERMS OF THE OFFER

The key information for the Entitlement Offer is summarised below.

The key information for the Entitlement Offer is summarised below.
Entitlement	One New Share and one free attaching New Option for every four Existing Shares held at the Record Date
Offer Price per New Share	$0.02
Shares on issue as at the date of this Prospectus	609,582,431
Existing Options on issue as at the date of this Prospectus *	14,400,000 (unlisted)
Maximum number of New Shares offered under this Prospectus*	152,395,607 New Shares (subject to rounding)
Total number of New Shares upon all New Shares being issued	761,078,038 (subject to rounding)
Maximum number of New Options offered under this Prospectus*	152,395,607 New Options (subject to rounding)
Total number of Options (listed and unlisted) upon all New Options being issued **	166,795, 607 (subject to rounding)
Amount to be raised if all New Shares offered under this Prospectus are issued	Approximately $3.0 million

*As noted in the table, the Company has 14,400,000 unlisted options. Under the terms of their options, those options holders will not be entitled to exercise their options until 1 May 2014, and accordingly the table assumes that no options are exercised before the Record Date.

** The Company will apply to the ASX to have the New Options admitted to Official Quotation (listed) on the ASX, but admission of the New Options to Official Quotation is not a condition of the Entitlement Offer – see page 10 for further details.

TIMETABLE OF THE OFFER

The following are key dates relating to the Entitlement Offer that you need to be aware of:

ACTIVITY	DATE
Announcement of the Entitlement Offer	Wed 12 February
Lodgement of Prospectus at ASIC and ASX	Wed 12 February
Lodgement of Appendix 3B at ASX	Wed 12 February
Despatch letter to Option holders advising of the Entitlement Offer	Wed 12 February
Despatch letter to Shareholders containing the information in Appendix 3B	Fri 14 February
Shares quoted on ‘ex’ basis	Mon 17 February
Rights trading commences	Mon 17 February
Record Date for identifying Eligible Shareholders entitled to participate in the Entitlement Offer (7:00 pm Sydney time)	Fri 21 February
Despatch Prospectus to Eligible Shareholders and announce despatch to ASX	Thu 27 February
Rights trading ends	Thu 6 March
New Shares and New Options quoted on a deferred settlement basis	Fri 7 March
Closing Date of Entitlement Offer (5:00 pm Brisbane time)	Fri 14 March

ASX notified of any under subscriptions	Wed 19 March
Issue of New Shares and New Options under Entitlement Offer	Mon 24 March
Deferred settlement trading ends	Mon 24 March
Trading of New Shares and New Options expected to commence	Tue 25 March

The above dates are indicative only. The Company, reserves the right to vary the above dates without notice, including extending the Closing Date of the Entitlement Offer without notice, subject to the Corporations Act, the ASX Listing Rules and the agreement of the Lead Manager.

RISKS

Prospective investors should read this Prospectus in its entirety before deciding whether to apply for New Shares or New Options under this Prospectus. In particular, the risks described commencing on page 24, include risk areas considered specific to the Company:

the speculative nature of investment in the Company;
financing and being able to raise further funds in the future;
mining and exploration risks;
environmental regulation and compliance with standards;
native title and compliance with Aboriginal Cultural Heritage requirements;
transport where it affects remote locations of projects;
the ability of the Company to fulfil requirements for maintaining tenements;
whether applications for new tenements or renewal of existing tenements will be achieved;
reliance on key management;
it not being envisaged that dividends will be paid in the foreseeable future,

as well as other risks of a more general nature, such as general economic and market conditions.

CHAIRMAN’S LETTER

Dear Shareholder

Diatreme Resources Limited (“Diatreme” or “the Company”) has lodged this Prospectus with ASIC in respect of the offer of a pro rata one (1) for four (4) renounceable Entitlement Offer, to raise up to $3.0M at a price of 2.0 cents ($0.02) per new Share, which also has one free attaching New Option excisable at 2.0 cents ($0.02) on or before the 11 March 2016.

Under the renounceable Entitlement Offer, those Shareholders who are registered on the Record Date (21 February 2014*) as Diatreme Shareholders with an address in Australia or New Zealand are eligible to take up their entitlements of one New Share plus one free attaching New Option for every four shares held at the Record Date.

Shareholders can also apply for new Shares and new Options in addition to their Entitlements (further details are set out on page 12). Non-shareholders may also apply for New Shares and New Options at the same price as the Entitlement Offer. New Shares and New Options will only be issued in response to applications for additional New Shares and New Options by Shareholders or shortfall applications by non-shareholders.

The Closing Date of the Entitlement Offer is 14 March 2014.*

Your Company is presenting this document to you for the purpose of raising working capital for certain projects and for general working capital.

The Cyclone Zircon Project, the Tick Hill Gold Project and the Anabama Iron Project are currently funded through joint venture arrangements.

Diatreme is seeking funds under this Prospectus to progress the Cape Bedford Silica Sand/Heavy Mineral and Clermont Copper/Gold projects in Queensland, the Glenthompson Copper Project in Victoria, the Noorina Heavy Mineral Sand Project in South Australia.

The Cape Bedford Silica/Heavy Mineral Sand Project is situated north of Cooktown and covers a zone of very large sand dunefields 55km in length and 10km in width, surrounding the Mitsubishi Cape Flattery silica sand mining operation. In the 1970’s, following air photo interpretation and geological reconnaissance, large bodies of silica sand were identified over the project area. Diatreme will initially target known silica sand mineralisation with drilling to define a mineral resource, to be followed by an assessment of mining feasibility.

Clermont and Glenthompson projects sit within newly identified “fertile” porphyry belts, holding potential for the discovery of porphyry style copper and or gold resources, in similar geological settings to the established Cadia Ridgeway copper gold operation in central NSW. Further targeted drilling will substantially progress the understanding of the geology and consequentially further the projects towards the search for viable mineralisation.

The Noorina Project (Eucla Basin) represents an extension of the strand system east of Cyclone and is untested over a strike length of 100km. Diatreme will utilise its drill rig to test the potential of this fossil shoreline with the aim of discovering additional heavy mineral sand resources.

More information can be found within the Prospectus and ASX Announcements.

Yours sincerely

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Anthony Fawdon Executive Chairman/CEO

* The Closing Date and other dates are indicative only – see page 7.

DETAILS OF THE ENTITLEMENT OFFER

Entitlement Offer of New Shares and New Options

The Company is offering each Eligible Shareholder the right to participate in a renounceable rights issue of one New Share and one free attaching New Option for every four New Shares held at 7:00 pm (Sydney time) on 21 February 2014 ( Record Date ) at an issue price of $0.02 per New Share ( Entitlement Offer ).

The New Options are exercisable at $0.02 each on or before 11 March 2016.

Where fractions arise in the calculation of an Entitlement, they will be rounded up to the nearest whole number of New Shares and New Options.

The Entitlement Offer is renounceable. This means the rights of each Eligible Shareholder to subscribe for his or her Entitlement may be transferred to another person and may be traded on ASX.

The Entitlement Offer seeks to raise approximately $3.0 million before costs. The purpose of the Entitlement Offer and the use of funds raised are set out on page 15 of this Prospectus.

Based on the capital structure of the Company (and assuming no existing Options are exercised prior to the Record Date), the maximum number of New Shares to be issued pursuant to the Entitlement Offer is 152,395,607 and the maximum number of New Options to be issued pursuant to the Entitlement Offer is 152,395,607.

The Company has 14,400,000 unlisted Options on issue as at the date of this Prospectus that are exercisable at $0.10 per Option. Under the terms of the Options, the holders of the Options will not be entitled to participate in the Entitlement Offer.

Your Entitlement is set out in the personalised Entitlement and Acceptance Form that accompanies this Prospectus.

Eligible Shareholders who take up their Entitlement in full will not have their percentage shareholding in the Company diluted by the Entitlement Offer. The percentage shareholding of Eligible Shareholders who do not take up their Entitlement in full will be diluted.

The terms of the New Shares and the New Options are set out on pages 22 to 23 of this Prospectus.

The New Shares will, from the date of issue, rank equally in all respects with other Shares.

Underwriter

The Entitlement Offer is not underwritten.

Lead Manager

Patersons Securities Limited is the Lead Manager of the offer and will provide the Company with assistance in undertaking the offer and to place any Shortfall on a reasonable endeavours basis. The Lead Manager’s role does not include any commitment to procure subscribers for rights or New Share and New Options, or to underwrite the Entitlement Offer or applications for Shortfall New Shares and New Options. Patersons Securities Limited has also been appointed as nominee for ineligible foreign shareholders (see further below under “Overseas Shareholders”.

Applications for Additional Shares and Options

Any part of your Entitlement not taken up will form part of the Shortfall.

If you are a Shareholder eligible to participate in the Entitlement Offer and you apply for your full Entitlement you may also apply for more New Shares and New Options than the number shown on your Entitlement and Acceptance Form. To do this please complete the Additional Shares and Options section in the Entitlement and Acceptance Form.

If you are not an existing Shareholder, applications for New Shares and New Options from the Shortfall may be made by using the Shortfall Application Form attached to or accompanying this Prospectus.

The issue of Additional Shares and Options in response to these applications for Additional Shares or the issue of New Shares and New Options to non-shareholder applicants will depend on there being sufficient Shortfall

Shares and Options available, and will be at the discretion of the Company and the Lead Manager, after all valid acceptances of Entitlements are fulfilled. There is no guarantee that you will receive Additional Shares or New Shares and New Options from the Shortfall. Additional Shares and New Shares and New Options will not be issued to Shareholders or others from the Shortfall where to do so would involve a breach of the ASX Listing Rules or any applicable law.

Shortfall Offer

The Company reserves the right to offer and issue any Shortfall Shares and Options at its discretion in consultation with the Lead Manager within 3 months after the Closing Date. The offer of New Shares and New Options from the Shortfall (the Shortfall offer) is an offer of the New Shares and Options offered under the Entitlement Offer not issued in response to acceptances and Applications made during the offer period. Under the terms of its appointment, the Lead Manager may arrange to place Shortfall Shares and Options on behalf of the Company, on a reasonable endeavours basis (and without being obliged to underwrite or apply for the Shortfall).

Issue of New Shares and New Options

New Shares and New Options for which valid acceptances are received and for which Shortfall Applications are accepted will be issued as soon as practicable after the Closing Date. Where the number of New Shares and New Options issued is less than the number applied for, or where no allotment is made, surplus application money will be refunded (without interest) to the Applicant as soon as practicable after the Closing Date.

ASX listing

Application for official quotation by ASX of the New Shares and New Options offered under this Prospectus will be made within seven days after the date of this Prospectus.

If ASX does not grant permission for the Official Quotation of the New Shares within three months after the date of issue of this Prospectus (or such period as is permitted by the Corporations Act), the Company, in its absolute discretion, will either repay the application monies to Applicants without interest or (subject to any necessary ASIC or ASX waivers or consents being obtained) issue a supplementary or replacement Prospectus and allow Applicants one month to withdraw their applications and be repaid their application monies without interest.

Official quotation of New Options will be conditional upon there being a sufficient number of holders of the New Options to satisfy the requirements of ASX for the creation of a new class of listed security. No application monies will be repaid if the New Options offered under this Prospectus are not admitted to official quotation.

The fact that ASX may grant official quotation to the New Shares or New Options is not to be taken in any way as an indication of the merits of the Company or the New Shares and New Options now offered for subscription.

Overseas Shareholders

This Prospectus does not constitute an offer of rights (entitlements), New Shares or New Options in any jurisdiction where, or to any person to whom, it would not be lawful to issue the Prospectus or make the Entitlement Offer.

The Entitlement Offer is not being made to any Shareholder, as at the Record Date, whose registered address is not situated in Australia or New Zealand. The Company has determined that it would be unreasonable to make the Entitlement Offer of New Shares and New Options to Ineligible Shareholders having regard to the small number of such Shareholders, and the cost of complying with applicable regulations in jurisdictions outside Australia and New Zealand.

Securities are offered to Eligible Shareholders in New Zealand in reliance on the Securities Act (Overseas Companies) Exemption Notice 2013 (New Zealand).

The Company has appointed Patersons Securities Limited as nominee for ineligible overseas shareholders. ASIC’s approval of Patersons Securities Limited as the nominee has been received.

The Company will issue the rights to the New Shares (and attaching New Options) that would otherwise have been issued to Ineligible Shareholders (had they been Eligible Shareholders) to the nominee. The nominee will not be subscribing for the New Shares and New Options but attempting on a “best endeavours” basis to dispose of the rights at any price necessary to any buyer it is, at its discretion, able to procure. The buyer(s) may be the nominee (as a principal), its directors and/or staff (but none of these are obliged to acquire the rights). If rights are sold, net proceeds of sale of those rights (if any) will be remitted to the Company for distribution to the Ineligible Shareholders for whose benefit the rights have been sold in proportion to the number of New Shares

they would have been entitled to under the Entitlement Offer had they been Eligible Shareholders (after deducting brokerage and other expenses). If rights are unable to be sold (or if sold, are not exercised) the New Shares and New Options represented by those rights will become part of the Shortfall Shares and Options.

The ability to sell the rights, and the price at which the rights can be sold, will depend on various factors, including market conditions. To the maximum extent permitted by law, neither the Company nor the nominee will be liable for a failure to sell rights (or New Shares or New Options), or to sell rights (or New Shares or New Options) at any particular price.

Withdrawal and early close of offer

Diatreme may in consultation with the Lead Manager, withdraw or close the Entitlement Offer before the Closing Date, if permitted by the Corporations Act and the ASX Listing Rules. If the Entitlement Offer is withdrawn, any application money received will be refunded (without interest).

ACTIONS REQUIRED BY ELIGIBLE SHAREHOLDERS

What you may do

Your Entitlement (the number of New Shares you are entitled to subscribe for) is shown on the personalised Entitlement and Acceptance Form which accompanies this Prospectus.

As an Eligible Shareholder, you may:

accept your Entitlement in full;
accept your Entitlement in full and apply for Additional Shares in excess of your entitlement;
sell all of your Entitlement;
accept part of your Entitlement and sell the balance;
accept part of your Entitlement and allow the balance to lapse;
transfer your Entitlement other than on ASX; or
allow all or part of Entitlement to lapse.

If you are in doubt as to the course you should follow, you should consult your stockbroker, accountant, solicitor or other professional adviser.

The Entitlement and Acceptance Form once lodged cannot be withdrawn. The Entitlement and Acceptance Form and does not need to be signed for it to be binding.

To accept your Entitlement in full

If you decide to take up all of your Entitlement, follow the instructions on the Entitlement and Acceptance Form to complete and return the Entitlement and Acceptance Form with payment by cheque, bank draft, money order or BPAY[®] .

® Registered to BPAY Pty Ltd ABN 69 079 137 518

To accept your Entitlement in full and apply for Additional Shares

If you wish to apply for Additional Shares, follow the instructions on the Entitlement and Acceptance Form to complete and specify the total number of New Shares you wish to apply for, and return the Entitlement and Acceptance Form with payment by cheque, bank draft, money order or make payment by BPAY[®] . See page 13 for further details.

If you wish to sell all of your Entitlement

Complete the section marked “Instructions to Stockbroker” on the back of the Entitlement and Acceptance Form, in accordance with the instructions contained on the form and lodge with stockbroker as soon as possible.

Rights trading will commence on ASX on 17 February 2014. Sale of your Entitlement (rights) must be completed by 6 March 2014 when rights trading is expected to cease.

* Dates are indicative only – see page 7.

If you wish to accept part of your Entitlement and sell the balance

Complete the Entitlement and Acceptance Form by inserting the number of New Shares you wish to take up (being less than as specified on the Entitlement and Acceptance Form) and complete the section marked “Instructions to Stockbroker” on the back of the form in respect of that part of your Entitlement you wish to sell. The Company accepts no responsibility for failure by your stockbroker to carry out your instructions.

If you wish to transfer your Entitlement other than on ASX

If you are a Shareholder and hold Existing Shares on the issuer sponsored sub-register, forward a completed Renunciation Form (obtained through your stockbroker or the Company’s share registry) together with your Entitlement and Acceptance Form completed by the transferee together with a cheque, bank draft or money order for the appropriate application monies to reach the Company’s share registry (at the postal address shown below), by 5.00 pm (Brisbane time) on the 14 March 2014.

If you are a Shareholder and hold Existing Shares registered on CHESS, you should contact your sponsoring broker.

The Company accepts no responsibility for failure by your stockbroker to carry out your instructions.

Entitlements not taken up

If you are an Eligible Shareholder and do not wish to apply for all or part of your Entitlement, you are not obliged to do anything.

Any part of your Entitlement not accepted by you will form part of the Shortfall.

The number of existing Shares you hold at the Record Date and the rights attached to those existing Shares will not be affected if you choose not to accept any of your Entitlement. However, your percentage shareholding in the Company will be diluted. The extent to which your shareholding is diluted will depend on the number of New Shares issued under the Entitlement Offer.

Your entitlement may have value and accordingly you should consider and obtain advice regarding renouncing (selling) your Rights, rather than necessarily allowing them to lapse.

Payment Methods

If you are an Eligible Shareholder payment must be made for the full number of New Shares and New Options (that is, the total of your Entitlement plus any Additional Shares and New Options applied for) when returning your Entitlement and Acceptance Form or making payment by BPAY[®] . See above about how to accept your Entitlement and (if you wish to do so) apply for Additional New Shares and New Options.

If you a non-shareholder applying for New Shares and New Options from the Shortfall, you must complete and return a Shortfall Application Form together with your payment by cheque, money order or bank draft.

Cheques, money orders or bank drafts should be made payable to " Diatreme Resources Limited – Share Offer Account " and crossed " Not Negotiable ".

All payments must be in Australian currency. The amount payable on Application will not be deemed to have been received until the Company receives clear funds.

If you are an Eligible Shareholder you can pay by BPAY[®] by following the instructions set out on the personalised Entitlement and Acceptance Form (which includes the biller code and your unique customer reference number). If you take no action you will not be taken to have applied for your Entitlement.

If you are an eligible Shareholder and you are paying by BPAY[®] you do not need to lodge your Entitlement and Acceptance Form with the share registry. However, by making a payment through BPAY[®] , you will be deemed to:

irrevocably accept the Entitlement Offer;
acknowledge that you have read and understood the terms of the Entitlement Offer as set out in this Prospectus;
apply to subscribe for New Shares and New Options in accordance with the terms of the Entitlement Offer; and
acknowledge that, other than as required by law, there is no right to withdraw or revoke your application once it is made.

Your BPAY[®] payment must be received no later than 5:00pm (Brisbane time) on the Closing Date.

If paying by BPAY[®] you should be aware that your financial institution may implement earlier cut-off times for electronic payments and these should be taken into consideration when making the payment.

If you have multiple holdings you will have multiple BPAY[®] reference numbers. To ensure that you receive your entitlement in respect of each holding, you must use the customer reference number shown on each personalised Entitlement and Acceptance Form when paying for any New Shares and New Options that you wish to accept or apply for in respect of that holding.

Completed Entitlement and Acceptance Forms with the application money may be mailed to the postal address, or delivered by hand to the delivery address, set out below:

Postal delivery	Hand delivery
Diatreme Resources Limited C/- Link Market Services Limited Locked Bag 3415 Brisbane QLD 4001	Diatreme Resources Limited C/- Link Market Services Limited 1A Homebush Bay Drive Rhodes NSW2138

Completed Shortfall Application Forms with the application money may be mailed to the following address:

Postal delivery	Hand delivery
Diatreme Resources Limited C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235	Diatreme Resources Limited C/- Link Market Services Limited 1A Homebush Bay Drive Rhodes NSW 2138

If you have any questions on how to complete the Entitlement and Acceptance Form, to take up your Entitlement, or to make payments, you should contact the Diatreme Resources Limited Offer Information Line on 1300 975 518 (within Australia) or +61 1300 975 518 (from outside Australia) between 8:30am and 5:30pm (Sydney time) Monday to Friday before the Closing Date.

All acceptances must be received by 5:00pm (Brisbane time) on 14 March 2014*, being the Closing Date of the Entitlement Offer.

* Dates are indicative only – see page 7.

The Company, its share registry Link Market Services Limited, the Lead Manager Patersons Securities Limited, and their respective personnel accept no responsibility for lost, delayed or misdelivered Entitlement and Acceptance Forms, or unsuccessful, late or delayed payments.

The Directors may at their discretion in consultation with the Lead Manager issue New Shares and New Options in response to Entitlement and Acceptance Forms received after the above date and time, but are under no obligation to do so. The Lead Manager may arrange to place Shortfall Shares and Options on behalf of the Company, on a reasonable endeavours basis.

It is your responsibility to determine your allocation prior to trading in Shares or Options.

Entitlement and Acceptance and Application forms and BPAY[®] payments binding

A completed and lodged Entitlement and Acceptance Form or Shortfall Application Form constitutes a binding offer to acquire New Shares and New Options on the terms and conditions set out in this Prospectus and, once lodged, cannot be withdrawn. The Entitlement and Acceptance Form or Shortfall Application Form does not need to be signed to be binding. Once a BPAY[®] payment instruction is given in accordance with an Entitlement and Acceptance Form, it is irrevocable and may not be varied or withdrawn except as required by law.

If your Entitlement and Acceptance Form or Shortfall Application Form is not completed correctly it may still be treated as a valid application for New Shares. The Directors' decision whether to treat a form as valid and how to construe, amend or complete the form is final. The Company accepts no responsibility for failure by your stockbroker to carry out your instructions .

PURPOSE AND EFFECT OF THE ENTITLEMENT OFFER

The Company is a diversified mineral explorer, seeking to develop its Cyclone Zircon Project in Western Australia as well as advancing its portfolio of other mineral sand and metalliferous projects throughout Australia.

Purpose

The purpose of the Entitlement Offer is to raise up to approximately $3.0 million. The Company intends to apply the funds raised from the Entitlement Offer as follows:

Application of funds	Amount
Cape Bedford Project(QLD)– silica and heavymineral sands	$0.8M
Clermont Project(QLD)– copper andgold	$0.4M
Glenthompson Project(VIC)– copper	$0.4M
Noorina Project(SA)- heavymineral sands	$0.1M
Otherprojects andprojectgeneration	$0.2M
WorkingCapital	$0.8M
Costs of Entitlement Offer	$0.3M
Total	$3.0M

Note : Funding joint venture expenditure of $2.0 million on the Cyclone Zircon Deposit Project is not part of this Entitlement Offer.

Funds raised from the exercise of the New Options will be applied towards the Company’s working capital requirements at the time of exercise.

In the event that the entitlement and shortfall placements have not reached the $3 million anticipated, then the Company will apportion the total funds raised on a near pro-rata basis; for example if the amount raised from the issue is $2 million, then the apportioned amounts would be based on the merits, prospectivity and requirements of the projects as follows:

Application of funds	Amount
Cape Bedford Project(QLD)– silica and heavymineral sands	$0.6M
Clermont Project(QLD)– copper andgold	$0.2M
Glenthompson Project(VIC)- copper	$0.2M
Noorina Project(SA)- heavymineral sands	$0.1M
Otherprojects andprojectgeneration	$0.1M
WorkingCapital	$0.6M
Costs of Entitlement Offer	$0.2M
Total	$2.0M

Effect on the capital structure – Shares

On completion of the Entitlement Offer the issued share capital of the Company will be:

Shares	No. of Shares
Shares on issue as at the date of this Prospectus	609,582,431
New Shares offered pursuant to this Prospectus **	152,395,607*
Total number of Shares on issue on completion of the Entitlement Offer	761,978,038*

*At the date of this Prospectus there are 14,400,000 existing unlisted options on issue. Under the terms of the options, the options holders will not be entitled to exercise their options until 1 May 2014.

** Subject to rounding

Effect on the capital structure – Options

On completion of the Entitlement Offer, the issued Options of the Company will be:

Options	No. of Options	Exercise Price	Expiry date
Unlisted Options	14,400,000	$0.10	30 April 2019
New Options offered pursuant to this Prospectus **	152,395,607	$0.02	11 March 2016
Total number of Options on completion of the Entitlement Offer**	166,795,607*

** Subject to rounding

Effect of the Entitlement Offer on the control of the Company

If all Entitlements are taken up, the Offer will have no effect on the control of the Company. However, should only some of the Entitlements be taken up under the Offer, the shareholding of Shareholders who do not take up their Entitlements, or only take up part of their part of their Entitlements, may be diluted.

Currently the association of Messrs Z Zhuang, C Zhuang, and Q Lin ( party A ) holds 19.8% of the Company’s issued Shares, and Mr A Tsang and associates (party B) hold 15.6%. Party A and party B are distinct, and are not associates of each other.

If only party A takes up its entitlements (and no entitlements are taken up by party B or any other shareholders), then party A’s holding on completion of the offer will be 23.6%.

If only party B takes up its entitlements (and no entitlements are taken up by party B or any other shareholders), then party B’s holding on completion of the offer will be 18.7%.

If only parties A and B take up their Entitlements (and no entitlements are taken up by any other shareholders), then party A’s holding on completion of the Offer will be 22.7% and party B’s holding on completion of the Offer will be 17.9%.

The table below sets out differing levels of take up of Entitlements by Rights holders other than party A and B, assuming both party A and B take up their respective Entitlements in full.

	Holding of association of Messrs Z Zhuang, C Zhuang, and Q Lin (party A)	Holding of Mr A Tsang & associates (party B)	Holding of other shareholders (not associated with party A or party B)


Shares on issue prior to offer is 609,582,431	120,702,072	94,869,443	394,010,916
% holding prior to Offer	19.8%	15.6%	64.6%
Maximum of 152,395,607 New Shares to be issued underthe Offer	30,175,518	23,717,361	98,502,728
% holding following the Offer if 75% take up of Entitlements by Rights holder other than party A and partyB	20.5%	16.1%	63.4%
% holding following the Offer if 50% take up of Entitlements by Rights holder other than party A and partyB	21.2%	16.6%	62.2%
% holding following the Offer if 25% take up of Entitlements by Rights holder other than party A and partyB	21.9%	17.2%	60.9%
% holding following the Offer if 0% take up of Entitlements by Rights holder other than party A and partyB	22.7%	17.9%	59.4%

Pro-forma balance sheet

An unaudited balance sheet as at 31 December 2013 and the unaudited pro-forma balance sheet as at 31 December 2013 shown below have been prepared on the basis of the accounting policies normally adopted by the Company and reflect the changes to its financial position.

The pro-forma balance sheet has been prepared assuming all Entitlements are accepted, no Options are exercised prior to the Record Date and including expenses of the Offer.

The pro-forma balance sheet has been prepared to provide investors with information on the assets and liabilities of the Company and pro-forma assets and liabilities of the Company as noted below. The historical and pro-forma financial information is presented in an abbreviated form, insofar as it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial statements.

	UNAUDITED 31 DECEMBER 2013	PROFORMA UNAUDITED 31 DECEMBER 2013
CURRENT ASSETS
Cash & cash equivalents(1)	983,979	3,731,891
Trade & other receivables	432,164	432,164
TOTAL CURRENT ASSETS	1,416,143	4,164,055

NON-CURRENT ASSETS
Property, plant & equipment	422,300	422,300
Exploration and evaluation assets	21,351,345	21,351,345
Other financial assets	701,960	701,960
TOTAL NON-CURRENT ASSETS	22,475,605	22,475,605

TOTAL ASSETS	23,891,748	26,639,660

CURRENT LIABILITIES
Trade & other payables	1,382,501	1,382,501
Provisions	136,404	136,404
TOTAL CURRENT LIABILITIES	1,518,905	1,518,905

TOTAL LIABILITIES	1,518,905	1,518,905

NET ASSETS	22,372,843	25,120,755

EQUITY
Issued capital(1)	45,733,401	48,481,313
Reserves	39,764	39,764
Accumulated losses	(23,400,322)	(23,400,322)
TOTAL EQUITY	22,372,843	25,120,755

Note (1) The Balance Sheet as at 31 December 2013 is unaudited. The pro-forma has been included for illustrative purposes to reflect the position of the Company on the assumption that the following transaction in relation to the Offer had occurred at 31 December 2013, namely, $2,747,912 is raised under the Offer (net of costs approximately of $300,000.

EXPLORATION PROJECTS

The Company intends to apply the funds raised from the Entitlement Offer, after costs, to part of its portfolio of other mineral sand and metalliferous projects and to working capital as set out in the table on page 15 (which assumes all New Shares and New Options offered under this Prospectus are issued). This section contains an outline of those exploration projects.

The following is, and should be read as, an overview which describes those projects. Further detail can be obtained from the Company’s announcements, which are available on the ASX’s and the Company’s websites.

In particular the Company has made announcements about its projects and plans to ASX, including two announcements regarding the Cyclone HM (Heavy Mineral) Resource Update released to ASX on 9 January 2014 and the Company’s Exploration Activities Report for the quarter ended 31 December 2013 released to ASX on 16 January 2014. A list of announcements to ASX since lodgement of the Company’s 2012 Annual Report is set out on page 28. During the application period of this Prospectus any person may request, and the Company will provide, copies of announcements free of charge.

It is not intended that funds raised under this Prospectus will be applied to the Company’s Cyclone Zircon Deposit, Tick Hill Gold and Anabama Iron Projects. These Projects are currently funded by joint venture funding.

CLERMONT COPPER/GOLD PROJECT – CENTRAL QUEENSLAND

The Clermont Project is situated around the town of Clermont in central Queensland. Diatreme is exploring for porphyry and stratabound bulk tonnage copper/gold targets. The project area covers numerous prospects including Rosevale Project and the historic Peak Downs Copper Mine.

Recent exploration over Clermont has resulted in an improved understanding of the geology and mineralisation of the Rosevale Porphyry Corridor. This work has highlighted drill-ready porphyry copper targets for follow-up drilling.

At the Gollan Prospect toward the north of the Rosevale Porphyry belt, the Company has defined from previous drilling a wide zone of hematite-bearing propylitic alteration of the intrusives, located in a zone of abundant secondary carbonate copper on surface. The geological setting is reminiscent of the high grade Ridgeway deposit at Cadia NSW.

Further exploration is warranted over Clermont particularly over the Rosevale Corridor for copper and at the Palm Trees Prospect for gold, Figure 1.

==> picture [418 x 291] intentionally omitted <==

Figure 1: Location of Clermont tenements and prospects

Details of drilling results in the Savannah Prospect within the Clermont Project are included in the Company’s Exploration Activities Report for the quarter ended 31 December 2013 released to ASX on 16 January 2014.

GLENTHOMPSON COPPER PROJECT – CENTRAL VICTORIA

Following recent technical studies conducted by the Victorian Geological Survey into the Mount Stavely Belt, Diatreme secured an exploration licence in an area that is now highly regarded as a “fertile” Andean-style magmatic arc system, prospective for porphyry copper deposits similar to the Cadia / Ridgeway deposits owned by Newcrest Mining in NSW.

==> picture [274 x 222] intentionally omitted <==

Located in western Victoria (Figure 2), Exploration Licence 5478 has been granted to the Company for a term of five years within this newly recognised porphyry belt. The licence has good geophysical drill targets under shallow overburden cover along with 30km of non-explored strike length with easy access.

A number of explorers have already discovered porphyry copper deposits within this belt and the Company’s tenement sits within the centre of the belt. The “Eclipse” and “Lexington” prospects held by Navarre Minerals Limited and “Thursdays Gossan” held by Stavely Minerals Pty Ltd are examples of what have been discovered to date in the immediate area.

Figure 2: Location of EL5478 (Glenthompson), western Victoria

==> picture [252 x 368] intentionally omitted <==

There is no outcrop over the tenement, therefore drilling will be directed by geophysics in the search for porphyry styles of mineralisation (Figure 3). A gravity geophysics survey has recently been completed by the Company which outlined a number of targets when coupled with the magnetics. These will be drill tested in the coming months using the Company’s drill rig.

Figure 3: EL5478 (Glenthompson) showing Total Magnetic Intensity

CAPE BEDFORD PROJECT – NORTH QUEENSLAND

The Cape Bedford / Cape Flattery area has large quantities of high quality silica sand with the potential for heavy mineral sands underlying the silica sands. Mitsubishi Corp. mines the Cape Flattery leases for Silica, which is surrounded by the Diatreme tenement application area, Figure 4.

Once the tenement has been granted, which is expected in the coming months, Diatreme can immediately start verifying, by drilling and assaying, known silica sand occurrences. The initial exploration is expected to define resources in order that they may be reported by the Company in accordance with the JORC Code and obtain bulk samples for process flowsheet development and analysis. Feasibility studies would then be undertaken later in the year. This has potential to be a very high value project and the Company considers it could be in production very quickly.

==> picture [337 x 470] intentionally omitted <==

Figure 4: Cape Bedford Tenement Locality Map

NOORINA HEAVY MINERAL PROJECT – EUCLA BASIN, SOUTH AUSTRALIA

Two exploration licences, lying 80km east of the Cyclone (Zircon) deposit and along the same projected ancient Barton Shoreline, have recently been granted to the Company. The tenements, covering approximately 1,340km[2] , extend along a 100km strike length of the shoreline. With cultural heritage surveys completed and drilling traverse lines in place, the Company plans to commence on-ground exploration in the near future with the aim of discovering additional heavy mineral sands resources.

ABOUT PREVIOUSLY ANNOUNCED INFORMATION

Information about the Clermont projects referred to above, insofar as it relates to exploration results, is or is based upon information previously contained in:

the Company’s presentation which contained information compiled by Company personnel under the supervision of Mr. David Jelley, dated and released to ASX as an announcement on 16 January 2014; and
the Company’s Exploration Activities Report for the quarter ended 31 December 2013 which contained information compiled by Mr. David Jelley, dated and released to ASX as an announcement on 16 January 2014.

Information about the Glenthompson project referred to above, insofar as it relates to exploration results, is or is based upon information previously contained in the Company’s Exploration Activities Report for the quarter ended 31 December 2013 which contained information compiled by Mr. David Jelley, dated and released to ASX as an announcement on 16 January 2014.

Information about the Cape Bedford project referred to above, insofar as it relates to exploration results, is or is based upon information previously contained in the Company’s Broker Presentations which contained information compiled by Company personnel under the supervision of Mr. David Jelley, dated and released to ASX as an announcement on 2 December 2013.

Information about the Noorina Heavy Mineral Project – Eucla Basin, SA referred to above, insofar as it relates to exploration results, is or is based upon information previously contained in the Company’s Mineral Sands Update which contained information compiled by Company personnel under the supervision of Mr. David Jelley, dated and released to ASX as an announcement on 12 August 2013.

Further detail can be obtained from each of the above announcements, which are available from the ASX website, www.asx.com.au. Mr. Jelley is a full time employee of the Company. The Company confirms that it is not aware of any new information or data that materially affects information as it relates to exploration results included in the announcements referred to, and that the form and context in which the Competent Person’s (Mr. Jelley’s) findings as they relate to exploration results are presented have not been materially modified.

RIGHTS AND LIABILITIES ATTACHING TO THE NEW SHARES AND THE NEW OPTIONS

The following is a summary of the rights and liabilities attaching to the New Shares and the New Options to be issued under this Prospectus. The summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of Shareholders or option holders.

Full details of the rights and liabilities attaching to New Shares are set out in the Company’s constitution, a copy of which has been lodged with ASIC. The Company will provide a copy of the Constitution during the application period, free of charge upon request. A copy of the Constitution is also available for inspection free of charge at the Company’s registered office during normal business hours.

Rights attaching to New Shares

The New Shares will be issued fully paid and will rank equally with the existing Shares.

A summary of rights and liabilities attaching to existing and New Shares follows:

1. Notice of meetings

Each Shareholder will be entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive all notices, accounts and other documents required to be furnished to Shareholders under the Constitution and the Corporations Act.

2. Voting

Subject to any rights and restrictions for the time being attached to any class of shares, at a meeting of Shareholders, each Shareholder entitled to vote may vote in person or by proxy or attorney or, being a corporation, by representative duly authorised under the Corporations Act, and has one vote on a show of hands and one vote for each Share on a poll.

A poll may be demanded by the chairman of a general meeting, by not fewer than five Shareholders who are present in person or by proxy, attorney or representative and who are entitled to vote, or by any one or more Shareholders holding not less than 5% of the total voting rights of all members having the right to vote.

3. Dividends

The profits of the Company that the Directors may from time to time determine to distribute by way of dividend are payable equally on all Shares.

4. Winding up

If the Company is wound up, the liquidator may, with the authority of a special resolution, divide among the Shareholder in kind, the whole or any part of the property of the Company and may, for that purpose, set a value as the liquidator considers fair upon the property to be so divided and may determine how the division is to be carried out between the Shareholders. The liquidator may, with the authority of a special resolution, vest the whole or any part of the property of the Company in trustees on trust for the benefit of Shareholders as the liquidators thinks fit.

If approved by special resolution, any division of the property of the Company may be otherwise than in accordance with the legal rights of the members of the Company.

5. Transfer of New Shares

Subject to the Constitution and the Corporations Act, Shareholders may transfer any or all of their shares by any computerized or electronic system established or recognised by the ASX Listing Rules or by an instrument in writing or any other form approved by the Directors.

The Directors may refuse to register a transfer of shares only if the ASX Listing Rules permit, and must refuse to register a transfer of shares if the ASX Listing Rules require the Company to do so. Subject to the ASX Listing Rules, the Company may not prevent, delay or interfere with the generation of, or the registration of, a paper based transfer of shares in registrable form.

Rights attaching to New Options

The terms and conditions of the New Options are as follows:

No additional amount is payable for the issue of the New Options.
Each New Option will entitle the holder to subscribe for one fully paid ordinary share in the capital of the Company for an exercise price of $0.02 on or before the expiry date.
The New Options expire at 5:00 pm (Brisbane time) on 11 March 2016 (the expiry date).
The New Options are exercisable by the delivery to the registered office of the Company of a notice in writing stating the intention of the option holder to exercise all or a specified number of New Options, accompanied by the relevant Option Certificate (if any) and a cheque made payable to the Company for the exercise price of each New Option.
Subject to the Corporations Act, the Listing Rules, the Constitution of the Company and any restriction obligations, the New Options are freely transferable and application will be made to ASX for Official Quotation of the New Options. ^
An exercise of only some New Options will not affect the rights of the option holder under the balance of the New Options held by him or her.
Upon the valid exercise of a New Option the Company must issue the resultant Share and dispatch a holding statement within the time required by the ASX Listing Rules.
New Shares issued on an exercise of New Options will rank, from the date of issue, equally with existing Shares of the Company in all respects.
The Company will, in accordance with the ASX Listing Rules and subject to any restrictions by ASX, apply to have New Shares issued on exercise of New Options listed for official quotation.
The New Options will not give any right to participate in dividends until New Shares are issued on the exercise of the relevant New Options.
The holder of New Options will be permitted to participate in any new pro-rata issue of securities of the Company subject to the prior exercise of the New Options, in which case the option holder will be notified by the Company of the proposed pro-rata issue in accordance with the requirements of the ASX Listing Rules and afforded that period to exercise the New Options.
If the Company, while a New Option remains unexercised, reorganises its issued capital (including a consolidation of capital, subdivision of capital, return of capital, reduction of capital by cancellation of paid up capital that is lost or not represented by available assets where no securities are cancelled, a pro rata cancellation of capital or in any other case), the number or exercise price (or both) of New Options to which the option holder is entitled will be changed to the extent necessary to comply with the Listing Rules applying to a reorganisation of capital at the time of the reorganisation.

^ Note: admission of the New Options to Official Quotation is not a condition of the Entitlement Offer – see page 10 for further details.

RISK FACTORS

The business activities of the Company are subject to various risks that may affect the future performance of the Company and the value of the New Shares and the New Options. The New Shares and New Options offered under this Prospectus are considered speculative.

A number of the material risk factors are set out below. This list is not exhaustive and prospective Applicants should consider the risks below, together with information contained elsewhere in this Prospectus and consult their professional advisers before deciding whether to apply for New Shares.

Speculative nature of investment

Any potential investor should be aware that subscribing for shares involves risks. An investment in the Company involves risks that may be higher than the risks associated with an investment in other companies.

The New Shares issued under the Entitlement Offer carry no guarantee with respect to the payment of dividends, return of capital or their market value.

New Options issued under this Prospectus may not be admitted to Official Quotation (see page 10).

Financing

The Company’s ability to take advantage of opportunities may depend in part on its ability to raise additional funds. There can be no assurance that any such funding will be available to the Company on favourable terms or at all.

Mining and exploration risk

The business of exploration, mineral development and production by its nature is subject to risk. The success of the Company will depend on the successful development of resources and successful management of operations. There can be no assurance that the Company’s attempts to develop and exploit its exploration activities will be successful.

Environmental regulation and risk

The Company’s operations are subject to state and federal laws and regulation regarding environmental hazards. These laws and regulations set various standards regulating certain aspects of health and environmental quality and provide for penalties and other liabilities for the violation of such standards and establish, in certain circumstances, obligations to remediate current and former facilities and locations where operations are or were conducted. Significant liability could be imposed on the Company for damages, clean up costs, or penalties in the event of certain discharges into the environment, environmental damage caused by previous owners of property acquired by the Company or its subsidiaries, or non compliance with environmental laws or regulations. Renewals or transfers of permits or licences may be delayed while allocation and the amount of liability for past matters is resolved, either between the Company and parties to a potential transaction or transfer, or with regulatory or other government bodies and authorities. This may also result in renewals or transfers being refused or not being completed in a timeframe suitable to the Company or third parties.

The Company proposes to minimise these risks by conducting its activities in an environmentally responsible manner, in accordance with applicable laws and regulations and where possible, by carrying appropriate insurance coverage.

Native title risk

The effect of the Native Title Act 1993 (Commonwealth) is that existing and new tenements held by the Company may be affected by native title claims and procedures.

The Company has not undertaken the historical, legal or anthropological research and investigations at the date of this Prospectus that would be required to form an opinion as to whether any existing or future claim for native title could be upheld over a particular parcel of land covered by a tenement.

There is a potential risk that a determination could be made that native title exists in relation to land the subject of a tenement held or to be held by the Company or its subsidiaries, which may affect the operation of the Company’s business and development activities. If it is determined that native title does exist or a native title claim is registered, the Company may need to comply with procedures under the Native Title Act 1993 (Commonwealth) in order to carry out its operations or to be granted any additional rights such as a mining lease.

Such procedures may take considerable time, involve the negotiation of significant agreements, may involve a requirement to negotiate for access rights, and require the payment of compensation to those persons holding or claiming native title in the land that is the subject of a tenement. The administration and determination of native title issues may have a material adverse effect on the Company and its business. The Company also engages in negotiations with native title claimants, and is aware of arrangements having been made with native title claimants in areas contiguous with or near its projects. Satisfactory completion of negotiations may be required before some activities can be undertaken at projects, notwithstanding that claims may not have been finalised. This could result in lengthy delays.

Aboriginal Cultural Heritage

Aboriginal cultural heritage legislation imposes duties of care that require persons, including the Company, to take all reasonable and practical measures to avoid damaging or destroying Aboriginal cultural heritage. The Company is required to develop suitable internal procedures to discharge its duty of care in order to avoid exposure to substantial financial penalties if its activities damage items of cultural significance. Under this legislation, indigenous people can exercise control over land with respect to cultural heritage without necessarily having established the connection element (as required under native title law). This creates a potential risk that the tenement holder may have to deal with several indigenous individuals or corporations, where no native title has been established, to identify and manage cultural heritage issues. This could result in tenement holders requiring lengthy lead times to manage cultural heritage for their projects.

Transport risks

The Company's Cyclone Zircon Project is located in a remote location in Western Australia. The success of the Company's Cyclone Zircon Project is dependent on Diatreme being able to operate the project in an economically viable and efficient manner. Any use of the land surrounding the Cyclone Zircon Project in a way that affects Diatreme's ability to efficiently transport and supply to customers will adversely affect the profitability and performance of the Company. Being able to arrange efficient transport will also be a factor to be taken into account in the Company’s other projects at the appropriate stage of exploration and development.

Tenements

The Company’s exploration activities are dependent upon the grant and maintenance of appropriate licences, permits, resource consents, access arrangements and regulatory authorities (authorisations), which may not be granted or may be withdrawn or made subject to limitations. As noted above, renewals and transfers may be affected by completing remediation obligations or allocating responsibility for environmental liabilities.

The Company’s failure to meet its work or expenditure obligations under its authorisations may lead to dilution of its interest in, or the loss of, such authorisations.

Application risk

The Company has a number of applications for exploration permits. Although the Company is not aware of any reason why the applications will not be granted, the grant involves the exercise of administrative functions (including discretion), which are beyond the control of the Company.

Specifically, the Cape Bedford Project tenement application falls within the scope of the Draft Cape York Regional Plan document issued by the Department of State Development, Infrastructure and Planning for consultation in November 2013. As the document is consultative only, the impact of any future government action over mineral exploration and mining within the regional plan area is unknown at this stage. The Company’s tenement application pre-dates the draft plan by five years.

Any failure of these applications to be granted may have a material adverse effect on the ability of the Company to explore for minerals on the areas in those applications.

Reliance on key management and employees

The responsibility of overseeing the day-to-day operations and the strategic management of the Company is dependent on the Company’s ability to attract and retain highly qualified management, scientific, technical and other personnel. There can be no assurance that there will be no detrimental impact on the Company if one or more of its employees cease employment.

Dividends

The Directors cannot give any assurance concerning the extent and timing of future dividends (if any) as this will depend on the future profitability and financial position of the Company as well as other economic factors. It is not envisaged that dividends will be paid on the Company’s increased capital in the foreseeable future.

Economic risks

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s activities, as well as on its ability to fund those activities. The mining industry is competitive and there is no assurance that, even if significant quantities of a mineral resource are discovered, a profitable market will exist for the sale of the same.

Further, sharemarket conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance.

ADDITIONAL INFORMATION

Continuous disclosure obligations

This Prospectus is issued by the Company in accordance with the special content rules under section 713 of the Corporations Act. That provision allows the issue of a more concise prospectus in relation to the offer of securities in a class that have been continuously quoted on ASX for the three months before the date of the prospectus or that are options to acquire continuously quoted securities.

The Company is a disclosing entity for the purposes of the Corporations Act and is therefore subject to regular reporting and disclosure obligations under the Corporations Act and the ASX Listing Rules.

These obligations require the Company to notify ASX continuously of information about specific matters and events as they arise for the purpose of ASX making the information available to investors. In accordance with section 713 of the Corporations Act, provided that the Company has otherwise complied with its continuous disclosure obligations under the Corporations Act and the ASX Listing Rules, it is not necessary to include general information in this Prospectus.

For the purposes of satisfying section 713 of the Corporations Act a prospectus must also incorporate information concerning an offer if such information:

(a) has been excluded from a continuous disclosure notice in accordance with the ASX Listing Rules; and
(b) is information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:
(i) the assets and liabilities, financial position and performance, profit and losses and prospects of the body; and
(ii) the rights and liabilities attaching to the securities being offered.

The prospectus must contain this information only to the extent to which it is reasonable for investors and their professional advisers to expect to find such information in the prospectus.

The Company seeks and engages in discussions on an ongoing basis in respect of potential opportunities for the establishment of new and the expansion of existing activities and business development opportunities. While the Company continues to seek and negotiate potential commercial opportunities in this respect, there is no certainty that any arrangement(s) will be finalised on particular terms, at a specific time, or at all. The Company will make further announcements in respect of any such discussions or negotiations in accordance with its disclosure obligations as developments occur.

The Company, as a disclosing entity under the Corporations Act states that:

(a) it is subject to regular reporting and disclosure obligations;
(b) copies of documents lodged with ASIC in relation to the Company may be obtained from, or inspected at, the offices of ASIC; and
(c) any person may request, and the Company will provide free of charge, a copy of each of the following documents during the application period of this Prospectus:
(i) the financial statements of the Company for the year ended 31 December 2012, being the most recent annual financial report of the Company lodged with ASIC before the lodgement of this Prospectus with ASIC;
(ii) the financial statements of the Company for the half-year ended 30 June 2013, being the most recent half-year financial report of the Company lodged with ASIC before the lodgement of this Prospectus with ASIC;
(ii) any continuous disclosure notices given by the Company since the lodgement of the annual financial report referred to in (i) above and before lodgement of this Prospectus. Continuous disclosure notices given by the Company since the lodgement of the annual financial report to the date of this Prospectus are listed below.

Given that the Company is a disclosing entity it may be required to release information to the market during the period between the date of this Prospectus and the Closing Date. Prospective investors are advised to refer to the Company’s website at www.diatreme.com.au for updated releases about events or matters affecting the Company.

ASX announcements

The following announcements (continuous disclosure notices) have been made by the Company to ASX since 29 April 2013 being the date of lodgement of the 2012 Annual Report incorporating the Company’s annual financial statements for the year ended 31 December 2012.

Document Date	Headline
16/01/2014	QuarterlyActivities Report Dec 2013
10/01/2014	QuarterlyCash Flow
09/01/2014	Cyclone HM Resource Update - JORC 2012
09/01/2014	HoA signed over Cyclone Zircon Project
09/01/2014	Appendix 3B
02/12/2013	Broker Presentations
11/11/2013	Discoveryof Water at Cyclone Project
29/10/2013	FNN Interview with Chairman
23/10/2013	Mining2013 Brisbane Presentation
23/10/2013	Clermont Project Update
18/10/2013	QuarterlyCash Flow Report
08/10/2013	Amended Appendix 3B
04/10/2013	Change of Director's Interest Notices
04/10/2013	Appendix 3B
27/09/2013	Appendix 3B - Exercise of Options
23/09/2013	Notification of Expiryof Options
16/09/2013	Clermont Copper Project Update
12/09/2013	Glen Thompson Copper Project Update
11/09/2013	Cyclone Zircon Project Update
23/08/2013	Change of Director's Interest Notice
22/08/2013	Top20 Shareholder List
22/08/2013	Half Year Financial Report 30 June 2013
22/08/2013	Change in substantial holding
22/08/2013	Becominga substantial holder
22/08/2013	Becominga substantial holder
22/08/2013	Change in Substantial Holding
20/08/2013	Information under ASX LR 3.10.5A & 7.1A.4(b)
20/08/2013	Appendix 3B
16/08/2013	Information under ASX LR 3.10.5A & 7.1A.4(b)
16/08/2013	Appendix 3B
14/08/2013	Broker Presentation
12/08/2013	Mineral Sands Update
12/08/2013	Mineral Sands Update
07/08/2013	Clermont Copper Project Update
02/08/2013	Initial Director's Interest Notice
01/08/2013	Non-executive Director Appointment
31/072013	QuarterlyActivities Report

Document Date	Headline
30/07/2013	Appendix 3B - 22M Shares
26/07/2013	Cyclone Project Farm-In Commitment
23/07/2013	CompanyFundingUpdate
12/07/2013	QuarterlyCash Flow Report
26/06/2013	Top20 Shareholder List
24/06/2013	Substantial Holder notices
21/06/2013	Change in substantial holding
17/06/2013	Tick Hill Gold Project Joint Venture
17/06/2013	Completion of Capital Raising& App3B
04/06/2013	Change of Director Interest Notices
31/05/2013	Section 708A Notice re Unlisted Options
31/05/2013	Appendix 3B
29/05/2013	Results of Annual General Meeting
29/05/2013	Chairman's Address to Annual General Meeting
22/05/2013	Clermont Copper Project
16/05/2013	Capital Raising
09/05/2013	Completion of Capital Raising
03/05/2013	Amended App5B - QuarterlyCash Flow Report
30/04/2013	QuarterlyActivities Report

Any person may request, and the Company will provide free of charge, a copy of any of the above announcements during the application period of this Prospectus.

Directors’ interests

The directors of the Company at the date of this Prospectus are:

Mr Anthony John Fawdon (CEO, Executive Chairman);
Mr David Hugh Hall (Executive Director - Operations);
Mr George Henry White (Non Exec. Director);
Mr Andrew Tsang (Non Exec. Director);
Mr Cheng (William) Wang (Non Exec. Director);
Mr Neil John McIntyre (Non Exec. Director); and
Mr Yufeng (Daniel) Zhuang (Non Exec. Director).

Except as disclosed in the Prospectus, no Director or proposed Director has, or has had within two years before lodgement of this Prospectus, any interest in:

the formation or promotion of the Company; or
any property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Entitlement Offer; or
the Entitlement Offer.

Except as disclosed in the Prospectus, no person has paid or agreed to pay any amount to any Director or has given or agreed to give any benefit to any Director, to induce the Director to become, or to qualify as, a Director of the Company or otherwise for services rendered by the Director in connection with the formation or promotion of the Company or the Entitlement Offer.

As at the date of this Prospectus, the Directors or their associates have an interest in the following securities:

Director	Existing Shares	Existing Shares	Existing Options	Existing Options
	Direct	Indirect*	Direct	Indirect
Anthony John Fawdon	1,800,000	2,069,577	1,000,000	0
David Hugh Hall	2,200,000	750,000	1,000,000	0
George Henry White	66,667	150,000	1,000,000	0
Andrew Tsang	38,895,600	55,973,843	1,000,000	0
Cheng (William) Wang	0	2,577,822	1,000,000	0
Neil John McIntyre	0	0	1,000,000	0
Yufeng Zhuang**	0	59,560,000	0	0

* Indirect holdings held by associates of the Directors

** Mr Yufeng Zhuang represents the interests of his father, Mr Zhensheng Zhuang, who is the direct holder of the 59,560,000 shares, being part of an association of shareholders holding 19.80% of the issued capital.

Participation by Directors in Entitlement Offer

The Directors are entitled to participate in the Entitlement Offer without Shareholder approval but are not obliged to.

If each Director or their associates take up their entitlements in full, they will receive the following New Shares and New Options, resulting in total holdings as set out in the following table:

Director	New Shares	New Options	Total Shares	Total Options
	(Direct & *Indirect) **	(Direct & *Indirect) **	(Direct & *Indirect) **	(Direct & *Indirect) **
Anthony John Fawdon	967,394	967,394	4,836,971	1,967,394
David Hugh Hall	737,500	737,500	3,687,500	1,737,500
George Henry White	54,167	54,167	270,834	1,054,167
Andrew Tsang	23,717,361	23,717,361	118,586,804	24,717,361
Cheng (William) Wang	644,456	644,456	3,222,278	1,644,456
Neil John McIntyre	-	-	-	1,000,000
Yufeng (Daniel) Zhuang**	14,890,000	14,890,000	74,450,000	14,890,000

* Indirect holdings held by associates of the Directors

** Mr Yufeng Zhuang represents the interests of his father, Mr Zhensheng Zhuang, who is the direct holder of 59,560,000 existing shares, being part of an association of shareholders holding 19.80% of the existing issued capital.

Payments to Directors

The constitution of the Company provides that the Directors may be paid, as remuneration for their services, a sum determined from time to time by the Company’s Shareholders in general meeting, with that sum to be divided amongst the Directors in such manner and proportion as they agree. The maximum aggregate amount that has been approved by Shareholders for payment to all Directors as director fees is currently $300,000 per annum.

Under the Company’s constitution the total amount of remuneration paid to all Directors as director fees must not be increased unless authorised by the Company in general meeting. This does not apply to remuneration payable to any Director under any executive service contract with the Company.

Directors are entitled to be reimbursed for travelling and other expenses incurred in attending meetings or in relation to the business of the Company.

The total amounts received or receivable by current Directors as fees and executive service remuneration (including superannuation) in the past two years (1 February 2012 to 31 January 2014) are:

Director	Total Paid or Payable (Past two years)
Anthony John Fawdon	$554,526
DavidHugh Hall	$489,847
GeorgeHenryWhite	$98,156
Andrew Tsang	$98,156
Cheng (William) Wang	$98,156
Neil John McIntyre	$98,156
Yufeng (Daniel) Zhuang	$20,568

Insurance and indemnities

The constitution of the Company allows the Company to indemnify Directors in relation to claims arising out of the discharge of their duties as Directors, and to pay the premium for insurance cover in respect of such claims, subject to the limitations imposed by the Corporations Act. The Company has taken out such insurance on behalf of its Directors.

Interests of advisers

Except as set out in this Prospectus, no person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus, or the Lead Manager:

holds or has at any time during the last two years held, any interest in the formation or promotion of the Company, or in property acquired or proposed to be acquired by the Company in connection with the Company’s formation or promotion or the Entitlement Offer, or in the Entitlement Offer itself; or
has been paid or agreed to be paid any amount, or received or agreed to receive any benefit, for services provided in connection with the formation or promotion of the Company or the Entitlement Offer.

Patersons Securities Limited, Australian Financial Services Licence Number 239052, the Lead Manager to the Entitlement Offer and nominee for ineligible foreign shareholders, is entitled to receive:

A management fee of $60,000 and 1% of the total funds raised by the offer;
A selling fee of 5% of the gross amount raised (acting on a reasonable endeavours basis) for subscriptions for Shortfall Shares and Options not subscribed during the offer period (other than on amounts raised from certain identified investors); and
Brokerage of 1.5% or $250 (whichever is the greater) on sales of rights as nominee for ineligible foreign shareholders.

Patersons Securities Limited is entitled to be reimbursed all reasonable costs, professional fees and expenses of and incidental to its role as Lead Manager to the Entitlement Offer and nominee for ineligible foreign shareholders.

Quinert Rodda & Associates Pty Ltd ( Quinert Rodda ) has acted as solicitors for the Company in connection with the Entitlement Offer. Quinert Rodda are entitled to receive professional fees of approximately $15,000 in respect of this work. Further amounts may be paid to Quinert Rodda in accordance with their normal time-based charges.

All amounts referred to above are exclusive of GST.

Consents

Patersons Securities Limited has given, and at the time of lodgement of this Prospectus, has not withdrawn its consent to be named as Lead Manager to the offer of securities under this Prospectus in the form and context in which it was named. Patersons Securities Limited was not involved in the preparation of any part of this Prospectus and did not authorise or cause the issue of this Prospectus. Patersons Securities Limited makes no express or implied representation or warranty in relation to Diatreme Resources Limited, the Prospectus or the offer and does not make any statement in this Prospectus, nor is any statement in it based on any statement made by Patersons Securities Limited. To the maximum extent permitted by law, Patersons Securities Limited expressly disclaims and takes no responsibility for any material in, or omission from, this Prospectus other than the reference to its name.

Link Market Services Limited has given, and not withdrawn before the lodgement of this Prospectus, its written consent to being named in this Prospectus as the Company’s share registry.

Quinert Rodda has given, and not withdrawn before the lodgement of this Prospectus, its written consent to being named in this Prospectus as the Company’s solicitors.

BDO Audit Pty Ltd has given, and not withdrawn before the lodgement of this Prospectus, its written consent to being named in this Prospectus as the Company’s Auditor.

Directors’ responsibility statement

The Directors of the Company have authorised the lodgement of this Prospectus with ASIC.

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Anthony J Fawdon

Executive Chairman/CEO

GLOSSARY

GLOSSARY
Additional Shares	means those New Shares that Eligible Shareholders may apply for under this Prospectus in excess of their Entitlement, in the event that there is a Shortfall.
Applicant	means an Eligible Shareholder or a non-shareholder who submits an Application.
Application	means the submission of an Entitlement and Acceptance Form (or in the case of non-shareholders the submission of a Shortfall Application Form) accompanied by the relevant application money or payment through BPAY®in accordance with the instructions in this Prospectus and/or on the relevant Entitlement and Acceptance Form or Shortfall Application Form.
ASIC	means the Australian Securities and Investments Commission.
ASX	means ASX Limited ACN 008 624 691, its applicable subsidiaries, or the securities exchange operated byanyof them, as the context requires.
ASX Listing Rules	means the official listing rules of ASX.
Company or Diatreme	means Diatreme Resources Limited ACN 061 267 061.
Closing Date	means 5:00 pm (Brisbane time) on 14 March 2014 or such other date as may be determined bythe Directors in consultation with the Lead Manager.
Constitution	means the constitution of the Company.
Corporations Act	means the_Corporations Act 2001_ (Cth), as amended.
Director	means a director of the Company.
Eligible Shareholder	means a Shareholder at the Record Date, whose registered address in the Company’s register of members is in Australia or New Zealand.
Entitlement	means the number of New Shares and New Options that an Eligible Shareholder is entitled to under the Entitlement Offer.
Entitlement and Acceptance Form	means the personalised entitlement and acceptance form accompanying this Prospectus.
Entitlement Offer	means the one for four renounceable entitlement offer of New Shares and free attachingNew Options.
Ineligible Shareholder	means a Shareholder who is not an Eligible Shareholder.
Issue Price	means 2 cents($0.02) per New Share(with one free attachingNew Option).
Lead Manager	means Patersons Securities Limited (Australian Financial Services Licence No: 239 052)
New Shares	means the Shares being offered to Eligible Shareholders under the Entitlement Offer.
New Option	means a free attaching Option, exercisable at $0.02 on or before 11 March 2016, to be issued at the ratio of one New Option for every New Share subscribed for under the Entitlement Offer.
Option	means an option to subscribe for Shares.
Prospectus	means this Prospectus, including any supplementary or replacement prospectus.
Record Date	means 21 February2014, 7:00pm(Sydneytime).
Share	means a fully paid ordinaryshare in the capital of the Company.
Shareholder	means aperson registered as the holder of a Share.
Shortfall	means the number of New Shares (and free attaching New Options) for which the Companydoes not receive valid acceptances.
Shortfall Application Form	means an application form for New Shares and New Options from the Shortfall attached to or accompanyingthis Prospectus.

All Registry communications to: Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia Telephone: +61 1300 554 474 ASX Code: DRX Website: www.linkmarketservices.com.au

ABN 33 061 267 061

==> picture [128 x 61] intentionally omitted <==

SRN/HIN:

Entitlement Number: Subregister:

Number of Eligible Shares held as at the Record Date, 7:00pm (Sydney time) on 21 February 2014: Entitlement to New Shares (on a 1 New Share for 4 basis): Entitlement to New Options (on a 1 New Option for 1 New Share basis): Amount payable on full acceptance at A$0.02 per Share: Offer Closes 5:00pm (Brisbane time): 14 March 2014

at A$0.02 per Share: Offer Closes 5:00pm (Brisbane time): ENTITLEMENT AND ACCEPTANCE FORM You do NOT need to Bpaypay[[®]] . pay[[®]] before 5:00pm (Brisbane time) on pay[[®]] pay[[® ]] you will

As an Eligible Shareholder you are entitled to acquire 1 New Share for every 4 Existing Shares that you hold on the Record Date, at an Offer Price of A$0.02 per New Share. In addition, for every 1 New Share subscribed for, Diatreme Resources Limited will issue 1 free attaching New Option with an exercise price of A$0.02 and an expiry date of 11 March 2016. You may also apply for New Shares in excess of your Entitlement, at the Offer Price. This is an important document and requires your immediate attention. If you do not understand it or you are in doubt as how to deal with it, you should contact your accountant, stockbroker, solicitor or other professional adviser.

IMPORTANT: The Offer is being made under the Prospectus dated 12 February 2014. The Prospectus contains information about investing in the New Shares. Before applying for New Shares, you should carefully read the Prospectus. This Entitlement and Acceptance Form should be read in conjunction with the Prospectus. If you do not have a paper copy of the Prospectus, you can obtain a paper copy at no charge, by calling the Diatreme Resources Limited Offer Information Line on 1300 975 518 (within Australia) or +61 1300 975 518 (from outside Australia).

PAYMENT OPTIONS

If you wish to take up all or part of your Entitlement (as shown above), or take up all of your Entitlement and apply for additional New Shares, you have two payment options detailed below.

OPTION 1: PAYING BY Bpay[®]

OPTION 2: PAYING BY CHEQUE, BANK DRAFT OR MONEY ORDER

If paying by Bpay[®] , refer to the instructions overleaf. You do NOT need to return the acceptance slip below if you elect to make payment by Bpaypay[[®]] . Payment must be received via Bpay[[®]] before 5:00pm (Brisbane time) on 14 March 2014. You should check the processing cut off-time for Bpay[[®]] transactions with your bank, credit union or building society to ensure your payment will be received by the Registry in time. By paying by Bpay[[® ]] you will have deemed to have completed an Application Form for the number of Shares subject of your application payment.

If paying by cheque, bank draft or money order, complete and return the acceptance slip below with your Application Monies. No signature is required on the acceptance slip. The acceptance slip with your Application Monies must be received by the Registry before 5:00pm (Brisbane time) on 14 March 2014.

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Telephone & Internet Banking – Bpay[®]

Biller Code: [XXXXXX] Ref:

Contact your bank or financial institution to make this payment from your cheque, savings, debit or transaction account. More info: www.bpay.com.au

® Registered to Bpay Pty Ltd ABN 69 079 137 518

See overleaf for details and further instructions on how to complete and lodge this Entitlement and Acceptance Form. If you do not take up or sell your rights, you may not receive any value for them. It is important that you decide whether to accept or sell your rights in accordance with the Prospectus.

THIS IS A PERSONALISED FORM FOR THE SOLE USE OF THE SHAREHOLDER AND HOLDING RECORDED ABOVE.

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----- Start of picture text -----

Please detach and enclose with payment
SRN/HIN:
9999999 Entitlement Number:
A Number of New Shares accepted (being not B Number of additional New Shares C Total number of New Shares accepted
more than your Entitlement shown above) (add Boxes A and B)
+ =
D PLEASE INSERT CHEQUE, BANK DRAFT OR MONEY ORDER DETAILS – Cheques, bank drafts or money orders must be drawn on an Australian branch
of a financial institution in Australian currency, made payable to “Diatreme Resources Limited – Share Offer Account” and crossed “Not Negotiable”.
Drawer Cheque Number BSB Number Account Number Amount of Cheque
A$
E CONTACT DETAILS – Telephone Number Telephone Number – After Hours Contact Name
( ) ( )
----- End of picture text -----*

DIATREME RESOURCES LIMITED

The Entitlement Offer to which this Entitlement and Acceptance Form relates is not being made to investors located or resident outside of Australia and New Zealand. In particular the Entitlement Offer is not being made to any person in the U.S. or to a U.S. person. The Prospectus and Entitlement and Acceptance Form do not constitute an offer or invitation to acquire Shares in any place in which, or to any person to whom, it would be unlawful to make such an offer or invitation.

C. Total Number of New Shares Subscribed for

To calculate total number of New Shares subscribed for, add Box A and Box B and enter this in Box C.

D. Cheque, bank draft or money order details

Enter your cheque, bank draft or money order details in section D. Cheques, bank drafts or money orders must be drawn on an Australian branch of a financial institution in Australian currency, made payable to “Diatreme Resources Limited – Share Offer Account” and crossed “Not Negotiable”. Please ensure sufficient cleared funds are held in your account, as your cheque will be banked as soon as it is received. If you provide a cheque or money order for the incorrect amount, Diatreme Resources Limited may treat you as applying for as many New Shares and Additional New Shares as your cheque, bank draft or money order will pay for.

ACCEPTANCE OF ENTITLEMENT OFFER

By either returning the Entitlement and Acceptance Form with payment to the Registry, or making payment received by Bpay[®] :

you represent and warrant that you have read and understood the Prospectus and that you acknowledge the matters, and make the warranties and representations;
you provide authorisation to be registered as the holder of New Shares acquired by you and agree to be bound by the Constitution of Diatreme Resources Limited.

E. Contact details your acceptance of New Shares, if necessary. (AVAILABLE TO SHAREHOLDERS WITH AN pay[[®]] you must contact your bank pay[[®]] : appear overleaf. Instructions to your Stockbroker I/We have accepted A$ And attach a cheque/bank draft for I/We wish to sell STOCKBROKER stockbroker. New Shares above your Entitlement for which

Enter your contact telephone number where we may contact you regarding your acceptance of New Shares, if necessary.

HOW TO APPLY FOR NEW SHARES

3. SALE OF YOUR ENTITLEMENT IN FULL OR IN PART BY YOUR STOCKBROKER AND ACCEPTANCE OF THE BALANCE

1. IF PAYING BY Bpay[®] (AVAILABLE TO SHAREHOLDERS WITH AN AUSTRALIAN BANK ACCOUNT ONLY)

If you wish to sell all of your Rights through your stockbroker or if you wish to sell part of your Rights through your stockbroker and accept the balance you should contact your stockbroker and provide details as requested which appear overleaf.

If you elect to make payment using Bpay[[®]] you must contact your bank or financial institution to make this payment from your cheque, savings, debit or transaction account. For more information on paying by Bpay[[®]] : www.bpay.com.au

You should complete the “Instructions to your Stockbroker” panel below and forward this Entitlement and Acceptance Form to your stockbroker. Instructions to your Stockbroker

Work out the total amount payable by you. To calculate the total amount, multiply the number of New Shares you wish to apply for by A$0.02.

Refer overleaf for the Biller Code and Reference Number. The Reference Number is used to identify your holding. If you have multiple holdings you will have multiple Reference Numbers. You must use the Reference Number shown on each personalised Entitlement and Acceptance Form when paying for any New Shares that you wish to apply for in respect of that holding.

I/We have accepted New Shares as per reverse side A$ And attach a cheque/bank draft for being acceptance monies at A$0.02 per New Share I/We wish to sell Rights to Ordinary Shares

2. IF PAYING BY CHEQUE, BANK DRAFT OR MONEY ORDER

Complete all relevant sections of the Entitlement and Acceptance Form USING BLOCK LETTERS. These instructions are cross referenced to each section of the Entitlement and Acceptance Form.

A. Acceptance of New Shares Enter into section A the number of New Shares you wish to apply for. The number of New Shares must be equal to or less than your Entitlement, which is set out overleaf.

4. DISPOSAL OF YOUR ENTITLEMENT OTHER THAN THROUGH A STOCKBROKER

A renunciation form must be used for all other transactions. These forms may be obtained from the Diatreme Resources Limited Registry or your stockbroker.

B. Application for Additional New Shares You can apply for more New Shares than your Entitlement. Please enter the number of additional New Shares above your Entitlement for which you wish to apply into Box B. Your Application for additional New Shares may not be successful (wholly or partially). The decision of Diatreme Resources Limited on the number of New Shares to be allocated to you will be final. No interest will be paid on any Application Monies received or returned.

5. OVERSEAS SHAREHOLDERS

The Prospectus and Entitlement and Acceptance Form do not constitute an offer of securities in any jurisdiction outside of Australia and New Zealand or to any person to whom it would not be lawful to issue the Prospectus. By applying for New Shares under this Entitlement and Acceptance Form or by accepting this offer, you represent and warrant that applying for New Shares does not breach any law in any relevant overseas jurisdiction.

6. HOW TO LODGE YOUR ENTITLEMENT AND ACCEPTANCE FORM

A reply paid envelope is enclosed for your use. No postage stamp is required if it is posted in Australia. Alternatively, if you have lost the reply paid envelope, or you have obtained the Prospectus electronically, your completed Entitlement and Acceptance Form with the payment for New Shares may be mailed to the postal address, or delivered by hand to the delivery address, set out below. If paying by Bpay[® ] you do not need to complete or return the Entitlement and Acceptance Form. You should check the processing cut off-time for Bpay[®] transactions with your bank, credit union or building society to ensure your payment will be received by the Registry by the close of the offer.

Mailing Address	Hand Delivery
Diatreme Resources Limited	Diatreme Resources Limited
C/- Link Market Services Limited	C/- Link Market Services Limited
Locked Bag 3415	1A Homebush Bay Drive
Brisbane QLD 4001	Rhodes NSW 2138(Please do not use this address for mailing purposes)

Make sure you send your Acceptance Slip and application payment allowing enough time for mail delivery, so Link Market Services Limited receives them no later than 5:00pm (Brisbane time) on 14 March 2014. Please ensure sufficient cleared funds are held in your account, as your cheque will be banked as soon as it is received. Diatreme Resources Limited reserves the right not to process any Acceptance Slips and cheques received after the Closing Date.

If you require further information on how to complete this Entitlement and Acceptance Form, please contact the Diatreme Resources Limited Offer Information Line on 1300 975 518 (within Australia) or +61 1300 975 518 (from outside Australia) between 8:30am and 5:30pm (Sydney time) Monday to Friday.

Broker Code

Adviser Code

ABN 33 061 267 061

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Shortfall Application Form

This is an Application Form for New Shares and New Options in Diatreme Resources Limited (“The Company”) under the terms set out in the Prospectus dated 12 February 2014. Shortfall New Shares and New Options are allotted at the Directors’ discretion. The Company cannot guarantee the availability of Shortfall New Shares and New Options for all or any of the applications. This Application Form and your cheque or bank draft must be received by the Share Registry by 5:00pm (Brisbane time) on 14 March 2014.

If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker or other professional adviser. The Prospectus contains information relevant to a decision to invest in Shares and Options and you should read the entire Prospectus carefully before applying for Shares and Options.

A

C

D

E

Shares applied for (on a 1 New Option for 1 New Share basis) Price per Share Application Monies , , at A$0.02 B A$ , , . PLEASE COMPLETE YOUR DETAILS BELOW (refer overleaf for correct forms of registrable names) Applicant Surname/Company Name Title First Name Middle Name Joint Applicant #2 Surname Title First Name Middle Name Designated account e.g. (or Joint Applicant #3) TFN/ABN/Exemption Code First Applicant Joint Applicant #2 Joint Applicant #3 TFN/ABN type – if NOT an individual, please mark the appropriate box Company Partnership Trust PLEASE COMPLETE ADDRESS DETAILS

Shares applied for (on a 1 New Option for 1 New Share basis) Price per Share Application Monies at B A$0.02 , , A$ , , . Prospectus dated 12 February 2014. Shortfall New Shares and New Options are allotted at the Directors’ discretion. The Company guarantee the availability of Shortfall New Shares and New Options for all or any of the applications. This Application Form and your or bank draft must be received by the Share Registry by5:00pm (Brisbane time) on 14 March 2014. If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker o professional adviser. The Prospectus contains information relevant to a decision to invest in Shares and Options and you read the entire Prospectus carefully before applying for Shares and Options.	Shares applied for (on a 1 New Option for 1 New Share basis) Price per Share Application Monies at B A$0.02 , , A$ , , . Prospectus dated 12 February 2014. Shortfall New Shares and New Options are allotted at the Directors’ discretion. The Company guarantee the availability of Shortfall New Shares and New Options for all or any of the applications. This Application Form and your or bank draft must be received by the Share Registry by5:00pm (Brisbane time) on 14 March 2014. If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker o professional adviser. The Prospectus contains information relevant to a decision to invest in Shares and Options and you read the entire Prospectus carefully before applying for Shares and Options.
P L E Title First Name Middle Name PLEASE COMPLETE YOUR DETAILS BELOW(refer overleaf for correct forms of registrable names) Applicant Surname/Company Name Title First Name Middle Name Joint Applicant #2 Surname





S A Designated account e.g. (or Joint Applicant #3) PLEASE COMPLETE ADDRESS DETAILS PO Box/RMB/Locked Bag/Care of (c/-)/Property name/Building name (if applicable) Suburb/City or Town State Postcode Unit Number/Level Street Number Street Name TFN/ABN type – if NOT an individual, please mark the appropriate box Company Partnership Trust Supe TFN/ABN/Exemption Code First Applicant Joint Applicant #2 Joint Applicant #3	r Fund

Email address (only for purpose of electronic communication of shareholder information)

CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here)

F X

Please note: that if you supply a CHESS HIN but the name and address details on your Application Form do not correspond exactly with the registration details held at CHESS, your Application will be deemed to be made without the CHESS HIN and any Shares and Options issued as a result of the Offer will be held on the issuer sponsored sub-register.

Telephone Number where you can be contacted during Business Hours Contact Name (PRINT)

G ( )

Cheques or bank drafts should be made payable to “Diatreme Resources Limited” in Australian currency and crossed “Not Negotiable”.

Cheque or Bank Draft Number BSB Account Number

H

LODGEMENT INSTRUCTIONS

Total Amount A$ , , .

You must return your application so it is received before 5:00pm (Brisbane time) on 14 March 2014 to: Link Market Services Limited, Locked Bag A14, Sydney South NSW 1235.

DRX SHF001

Your Guide to the Application Form

Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form.

The Shares and Options to which this Shortfall Application Form relates are Diatreme Resources Limited Shares and Options. Further details about the Shares and Options are contained in the Prospectus 12 February 2014 issued by Diatreme Resources Limited.

The Australian Securities and Investment Commission requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant Prospectus. This Shortfall Application Form is included in the Prospectus.

The Prospectus contains important information about investing in the Shares and Options. You should read the Prospectus before applying for Shares and Options.

A Insert the number of Shares and Options you wish to apply for. You may be issued all of the Shares and Options applied for or a lesser number.
E Please enter your postal address for all correspondence. All communications to you from Diatreme Resources Limited and the Share Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.
B Insert the relevant amount of Application Monies. To calculate your Application Monies, multiply the number of Shares and Options applied Applicants, only one address can be entered. for by the issue price. Amounts should be in Australian dollars. Please F If you are already a CHESS participant or sponsored by a CHESS make sure the amount of your cheque or bank draft equals this amount. participant, write your Holder Identification Number (HIN) here. If the
C Write the full name you wish to appear on the register of Shares and name or address recorded on CHESS for this HIN is different to the Options. This must be either your own name or the name of a company. details given on this form, your Shares and Options will be issued to Diatreme Resources Limited’s issuer sponsored subregister.

G H to result in your Application being rejected. Diatreme Resources Limited Share Offer C/- Link Market Services Limited 1A Homebush Bay Drive Rhodes NSW 2138 (do not use this address for mailing purposes) Corporations Act 2001

C Write the full name you wish to appear on the register of Shares and Options. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title.
G Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your Application.
H Please complete the details of your cheque or bank draft in this section. The total amount should agree with the amount shown in section B. Make your cheque or bank draft payable to “Diatreme Resources Limited” in Australian currency and cross it “Not Negotiable”. Your cheque or bank draft must be drawn on an Australian bank. Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your Application being rejected.
D Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, Diatreme Resources Limited will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments.

LODGEMENT INSTRUCTIONS

This Application Form and your cheque or bank draft must be mailed or delivered so that it is received before 5:00pm (Brisbane time) on 14 March 2014 at: Diatreme Resources Limited Share Offer Diatreme Resources Limited Share Offer C/- Link Market Services Limited C/- Link Market Services Limited Locked Bag A14 1A Homebush Bay Drive Sydney South NSW 1235 Rhodes NSW 2138 (do not use this address for mailing purposes)

Link Market Services Limited advises that Chapter 2C of the Corporations Act 2001 requires information about you as a shareholder (including your name, address and details of the Shares and Options you hold) to be included in the public register of the entity in which you hold Shares and Options. Information is collected to administer your shareholding and if some or all of the information is not collected then it might not be possible to administer your shareholding. Your personal information may be disclosed to the entity in which you hold Shares and Options. You can obtain access to your personal information by contacting us at the address or telephone number shown on this form. Our privacy policy is available on our website (www.linkmarketservices.com.au).

CORRECT FORMS OF REGISTRABLE NAMES

Note that ONLY legal entities are allowed to hold Shares and Options. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below.

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual
Usegiven names in full,not initials	Mrs Katherine Clare Edwards	K C Edwards
Company Use Company’s full title,not abbreviations	Liz Biz Pty Ltd	Liz Biz P/L or Liz Biz Co.
Joint Holdings Use full and complete names	Mr Peter Paul Tranche & Ms Mary Orlando Tranche	Peter Paul & Mary Tranche
Trusts	Mrs Alessandra Herbert Smith	Alessandra Smith
Use the trustee(s) personal name(s)		Family Trust
Deceased Estates	Ms Sophia Garnet Post &	Estate of late Harold Post
Use the executor(s) personal name(s)	Mr Alexander Traverse Post	or Harold Post Deceased
Minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation	Mrs Sally Hamilton	Master Henry Hamilton
Partnerships Use the partners’ personal names	Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith	Fred Smith & Son
Long Names	Mr Hugh Adrian John Smith-Jones	Mr Hugh A J Smith Jones
Clubs/Unincorporated Bodies/Business Names Use offce bearer(s) personal name(s)	Mr Alistair Edward Lilley	Vintage Wine Club
Superannuation Funds Use the name of the trustee of the fund	XYZ Pty Ltd	XYZ Pty Ltd Superannuation Fund

Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

AI assistant

DIATREME RESOURCES LIMITED — Capital/Financing Update 2014

64787_rns_2014-02-11_e05c725c-03ed-4f7f-9c49-b884359367dc.pdf

RIGHTS ISSUE – LODGEMENT OF PROSPECTUS

DIATREME RESOURCES LIMITED

ENTITLEMENT OFFER PROSPECTUS

Important notice

TABLE OF CONTENTS

CORPORATE DIRECTORY

Directors

Lead Manager to the Entitlement Offer

Share Registry*

Company Secretary (Joint)

Registered Office

Solicitors

Auditor*

IMPORTANT INFORMATION

Electronic Prospectus

Not investment advice

Disclaimer

Forward-looking statements

No overseas offering

Taxation

Privacy

Governing law

Glossary

KEY TERMS OF THE OFFER

TIMETABLE OF THE OFFER

RISKS

CHAIRMAN’S LETTER

Dear Shareholder

DETAILS OF THE ENTITLEMENT OFFER

Entitlement Offer of New Shares and New Options

Underwriter

Lead Manager

Applications for Additional Shares and Options

Shortfall Offer

Issue of New Shares and New Options

ASX listing

Overseas Shareholders

Withdrawal and early close of offer

ACTIONS REQUIRED BY ELIGIBLE SHAREHOLDERS

What you may do

To accept your Entitlement in full

To accept your Entitlement in full and apply for Additional Shares

If you wish to sell all of your Entitlement

If you wish to accept part of your Entitlement and sell the balance

If you wish to transfer your Entitlement other than on ASX

Entitlements not taken up

Payment Methods

Entitlement and Acceptance and Application forms and BPAY[®] payments binding

PURPOSE AND EFFECT OF THE ENTITLEMENT OFFER

Purpose

Effect on the capital structure – Shares

Effect on the capital structure – Options

Effect of the Entitlement Offer on the control of the Company

Pro-forma balance sheet

EXPLORATION PROJECTS

CLERMONT COPPER/GOLD PROJECT – CENTRAL QUEENSLAND

GLENTHOMPSON COPPER PROJECT – CENTRAL VICTORIA

CAPE BEDFORD PROJECT – NORTH QUEENSLAND

NOORINA HEAVY MINERAL PROJECT – EUCLA BASIN, SOUTH AUSTRALIA

ABOUT PREVIOUSLY ANNOUNCED INFORMATION

RIGHTS AND LIABILITIES ATTACHING TO THE NEW SHARES AND THE NEW OPTIONS

Rights attaching to New Shares

1. Notice of meetings

2. Voting

3. Dividends

4. Winding up

5. Transfer of New Shares

Rights attaching to New Options

RISK FACTORS

Speculative nature of investment

Financing

Mining and exploration risk

Environmental regulation and risk

Native title risk

Aboriginal Cultural Heritage

Transport risks

Tenements

DIATREME RESOURCES LIMITED Capital/Financing Update 2014